Second Circuit Says § 6751(b) Means What It Says-Appeals Officer in CDP Appeal Must Verify the Supervisor Approval Requirement (6/30/26)

In Besicorp Group, Inc. v. Commissioner, 180 F.4th 402 (2d Cir. 2026), 2Cir here and GS here, the Court held that, in a CDP Appeals Office Conference, the Appeals Officer must verify the IRS’s compliance with § 6751(b)’s written supervisor approval requirement for penalties. The Court says that in 29 pages cogently, if not succinctly, traversing the applicable statute and other authority. Those 29 pages are not all fluff without lessons for students and practitioners, so I address certain key points.

1. I open with a comment I make in a soon to be published article. Section 6751(b) is nonsensical and a textual mess. That comment was focused on the courts’ flailing around to make sense of the mess and was an argument for courts to approve the regulations adopted in December 2024 to make sense of key components of § 6751(b). However, as to the text in § 6751(b) that Besicorp interprets and applies, the text is clear, so Besicorp is correct that CDP Appeals Office proceedings require verification of the written supervisor approval requirement. (I except from that the possible application of res judicata discussed below in ¶ 5.) That is a textualist reading of the text; I don’t see any reasonable mode of interpretation that would reach a different conclusion.

2. Of course, in making that verification, the Appeals Officer must wade into the mess of the other components of § 6751(b) which are a mess with differing interpretations by the courts. I suppose, the Appeals Officer might rely upon the § 6751(b) regulations, either proposed or permanent, although the Besicorp Appeals Office hearing likely occurred before the regulations were proposed or adopted. (In this regard, the Second Circuit argument in Besicorp was 2/5/24; and Besicorp (and consolidated cases) were filed in the Tax Court in 2017. See T.C. dkt. Entries here, before the 2024 regulations were even a twinkle in the Commissioner’s eye.

3. The income tax liabilities in Besicorp and consolidated cases arose from bullshit tax shelters. The Court says the tax and interest (Slip Op. 3) reporting and tax savings from “tax shelter transactions designed to avoid the payment of taxes,” as determined by the IRS. The tax shelter transactions were of the “intermediary tax shelter” aka Midco ilk. (Slip Op. 10.) Besicorp’s deficiency was $50 million. (Slip Op. 5.) And, being a category of bullshit tax shelters, the IRS also asserted the 40% penalty which for Besicorp was “roughly $20 million penalty on a $50 million deficiency for its accuracy-related gross valuation misstatements,” citing § 6662(h). (Slip Op. 5.)

4. The taxpayers involved in Besicorp and consolidated cases may have been affiliated with the promoters who promoted the bullshit tax shelters. Indeed, from my work in this area, I found it was not uncommon for the promoters who “earned” very large amounts from promoting the fake tax savings (a price taxpayers were willing to pay for fraud insurance) to themselves then “shelter” their income with their own bullshit tax shelters (always permitting some variance in the smoke and mirrors game). I note in this regard that one of the attorneys for the taxpayers was also an attorney for at least one promoter and related corporation.

Another Gross Overvaluation Conservation Easement Claim Fails (5/6/26)

In Kimberly Road Fulton 25, LLC v. Commissioner, T.C. Memo. 2026-36 (5/4/26), Case # 2026-36 here at #178 and GS here, the Court (Judge Holmes) shot down another bullshit syndicated conservation easement (“SCE”). As is common, the bullshit was in the gross overvaluation. So, not only do the partnerships (and their partners) in the consolidated cases lose, but they suffer the 40% 6662(h) gross valuation misstatement penalties. On the penalties, the Court’s analysis driven by its holding of a gross overvaluation is short (p.39, footnote omitted):

VI. Penalties

          The FPAAs determined the applicability of section 6662(h) gross-valuation misstatement penalties. This penalty applies if the value of property claimed on a return is 200% or more of the amount determined to be the correct value. It’s a 40% penalty, and there’s no reasonable cause defense. I.R.C. § 6664(c)(3). This is a math question, and it is a math question that we must find the Commissioner got right. The parties stipulated that the Commissioner complied with the supervisory-approval requirement of section 6751(b)(1) in asserting these penalties, and we therefore uphold them. 

Because its material facts are many and duplicative of patterns in earlier bullshit SCE cases, the only thing that makes this opinion worth reading is its opening (Slip Op. 1-2) which anticipates the conclusions I summarized above:

Jeffrey Grant’s grandfather taught him a saying that has stuck with him all his life: “Sometimes, a fast nickel is worth more than a slow dime.” A self-identified “land man,” Grant has [*2] made a career of buying vacant land in Georgia and quickly turning it into enough “fast nickels” to make a good living.

NTA Annual Report to Congress, with Purple Book Recommendations for Legislation (1/8/26)

This post is a little late in coming, but the National Taxpayer Advocate issued the Annual Report to Congress-2025, here. The key portion of the report for tax procedure enthusiasts is the “Purple Book,” here, described as:

a concise summary of 71 legislative re1commendations that the National Taxpayer Advocate believes will strengthen taxpayer rights and improve tax administration. Most of the recommendations have been made in detail in prior reports, but others are presented in this book for the first time. The National Taxpayer Advocate believes that most of the recommendations presented in this volume are non-controversial, common-sense reforms that the tax-writing committees, other committees, and other members of Congress may find useful.

 There are many proposals in the Purple Book that could affect tax procedure. The discussions of current law and problems, with the proposed legislative solutions are quite good. Given that Congress has not acted on the proposals yet, I thought this would be just a “notice” blog offering the descriptions in the listing (like a table of contents): 

STRENGTHEN TAXPAYER RIGHTS
1. Elevate the Importance of the Taxpayer Bill of Rights by Redesignating It as Section 1 of the Internal Revenue Code
2. Require the IRS to Timely Process Claims for Credit or Refund
3. Require Notices of Claim Disallowance to Clearly State the Reasons for Disallowance, Explain Administrative and Judicial Appeal Options, and  Specify Applicable Timeframes

IMPROVE THE FILING PROCESS
4. Treat Electronically Submitted Tax Payments and Documents as Timely If Submitted on or Before the Applicable Deadline
5. Authorize the IRS to Establish Minimum Standards for Federal Tax Return Preparers and to Revoke the Identification Numbers of Sanctioned Preparers
6. Extend the Time for Small Businesses to Make Subchapter S Elections
7. Adjust Individual Estimated Tax Payment Deadlines to Occur Quarterly
8. Eliminate Duplicative Reporting Requirements Imposed by the Bank Secrecy Act and the Foreign Account Tax Compliance Act
9. Authorize the Use of Volunteer Income Tax Assistance Grant Funding to Assist Taxpayers With Applications for Individual Taxpayer Identification Numbers

Tax Court in Order Denying Petitioner's Hail Mary § 6751(b) Pass Cautions Counsel About Speculative Claims, Particularly Those Impugning IRS Counsel (2/3/26)

I write again on another “Hail Mary” attempt by a taxpayer to get out of penalty to avoid the consequences of their own conduct/misconduct. The setting is the ubiquitous issue in penalty cases as to whether the IRS foot-faulted in the written supervisor approval requirement in § 6751(b). Not surprisingly, the setting is a conservation easement case with what appears to have been an excessive valuation claim—$44,937,000. (It is not clear from the Order whether it is a syndicated conservation easement, but that makes no difference for excessive valuation claims.) Usually, in those cases, a fair inference is that the promoters and those reporting the claim knew the valuation was excessive and thereby intended to report fraudulently within the meaning of § 6663 civil fraud penalty.

In Palmwood Holdings, LLC v. Commissioner (T.C. No. 17489-23, here, Order at # 54 dated 2/3/26), the IRS asserted the civil fraud penalty, § 6663, in the Answer to the Petition. Judge Urda briskly goes through the relevant facts that compel rejection of the petitioner’s Hail Mary pass. Judge Urda rejects petitioner’s wild speculations about some of the proffered summary judgment record. Judge Urda concludes (Slip Op.  4-5) with this cautionary advice directed to the tax matters partner's (Investment's) Counsel):

          We have time and again rejected the argument that penalties in fact [*5] recommended by the relevant IRS official were in substance determined by someone else. See, e.g., Sand Valley Holdings, LLC v. Commissioner, T.C. Memo. 2025-74, at *7–8; Cattail Holdings, LLC v. Commissioner, T.C. Memo. 2023-17, at *9–11. The “‘initial determination’ of a penalty assessment” is a formal action directed to a particular taxpayer. See Frost v. Commissioner, 154 T.C. 23, 32 (2020) (quoting Belair Woods, 154 T.C. at 15). The word “determination” has “an established meaning in the tax context” and denotes an action “with a high degree of concreteness and formality.” Nassau River Stone, LLC v. Commissioner, T.C. Memo. 2023-36, at *6 (quoting Belair Woods, 154 T.C. at 15). The record before us conclusively establishes that Mr. Wooldridge made the “initial determination” to assert the fraud penalty set forth in that pleading. Communications three years prior, even if they involved this case, would be neither here nor there.

Tax Court Dawson Access to Simultaneous Opening Briefs in Syndicated Conservation Easement (1/12/26)

Readers of this blog may know that the Tax Court’s Dawson tool shows the docket entries for cases but has historically included for public view by link only documents prepared and filed by the Court. Dawson is now showing some documents prepared and filed by the parties. For an example, I point to the Simultaneous Opening Briefs in Capitol Places II Owner, LLC v. Commissioner (T.C. No. 16536-23 here at ## 264-265) involving a syndicated conservation easement. (Simultaneous Opening Briefs are acronymed or initialized to SIOB in the system and I use that convention here.) Readers might particularly be interested in the Petitioner’s SIOB, at #265 (note that the Dawson system does not have permanent links, so those wanting to see or download the documents must do so from the docket entries which I link above). Added 1/12/26 @ 10:00pm: I have been reminded that, on 5/5/23, the Tax Court entered Administrative Order No. 2023-02, here, that PostTrial Briefs and Amicus Briefs would be available on Dawson to view and download.

Petitioner’s SIOB is 372 pages; the IRS’s is 221 pages. I have made no attempt to read either of those briefs, but I have paged through the table of contents of both briefs and some of the briefs (as discussed below). The Petitioner's table of contents is 12 pages long and indicates that the body of the brief is 339 pages long.

Judging from Petitioner's table of contents, Petitioner offers a generous smorgasbord of all imaginable claims, many of which appear to be Hail Mary arguments.  Gemini AI says a Hail Mary argument in a legal brief is an argument “highly unlikely to succeed but is included as a last resort, in the desperate hope that a court might accept it.” I am not opining that some of the arguments are weak on merits but merely offering my gut reaction. Of course, ultimately the fatal weakness in these shelters are the bullshit valuations that often accompany the syndications to justify the return reporting positions.

Some points I noted:

 1. IRS statement (p. 11):

 55. The 2014 Form 1065 claimed a noncash charitable contribution deduction in the amount of $23,909,000 for the façade easement contribution. Ex. 32-J.

 2. IRS ultimate findings of fact (pp 92-93):

ULTIMATE FINDINGS OF FACT

1. The FMV of the Subject Property prior to the donation of the easement was $2,770,000. Entire record.

2. The FMV of the Subject Property after the donation of the easement was $2,710,000. Entire record.

3. The FMV of the easement donation was $60,000. Entire record. 4. CP II Owner is not entitled to deduct (1) the $10,000 paid for the Clark Appraisal, (2) the $70,333 paid for the LDS, or (3) the $800,000 paid to GBX for “Tax Consulting” as rental real estate expenses, and those expenses were  properly reclassified as Other Deductions at Schedule K, Line 13d in the FPAA. Entire record.

5. The FPAA was issued timely and the assessment statute expiration date has not passed. Entire record.

6. The accuracy-related penalties asserted with respect to CP II Owner received timely  supervisory approval pursuant to I.R.C. § 6751(b). Entire record.

7. Penalties under I.R.C. § 6662 for gross valuation misstatement, substantial valuation misstatement, negligence,3 and substantial understatement of income tax apply; reasonable cause defenses do not apply. Entire record.

Fn 3 As discussed in respondent’s pre-trial memorandum filed on April 11, 2025, respondent is no longer asserting the negligence or disregard of rules or regulations penalty with respect to the noncash charitable contribution deduction adjustment.

Tax Court Rejects Various Hail Mary Claim, Including APA Claims, to Get Out of Penalty Free (10/8/25)

In Computer Sciences Corp. v. Commissioner, 165 T.C. ___, No. 8 (2025), TC Case No. 4823-21, here, at entry 305 dated 10/6/25*, GS here**, and TN here, the Court (Judge Lauber) issued yet another § 6751(b), here, written supervisor approval opinion where, as in other cases, the taxpayer seeks to avoid an IRS penalty because of a supposed IRS footfault in the penalty assertion process. In addition to the usual § 6751(b) hail mary claims for a get out of penalty free escape, the taxpayer raises Administrative Procedure Act (“APA”) Claims which, I presume, are the reason the opinion was designated for T.C. reporting (as opposed to T.C. Memo or simply an Order).

For persons wanting a preliminary look at the underlying issues of what the case is all about, go to the docket entries linked above at entry 42 Order dated 7/24/23.

I report here on the APA claims, and will then cover its reference to the § 6751(b) regulations adopted in final in December 2024.

I start my discussion with a quote from Bryan Camp’s iconic post The APA Is Not A Hammer (Procedurally Taxing Blog 6/24/22), here, which opens:

Kristin Hickman loves the APA. To channel Jed Rakoff, it’s her Stradivarius, her Colt 45, her Louisville Slugger, her Cuisinart, and her True Love. It’s her Hammer, her righteous Mjölnir.

And when you have a hammer, everything looks like a nail. Including ALL Treasury regulations.

Although Computer Sciences is not directly attacking regulations, the same comment is appropriate here. With the modern claims about the APA, everything begins to look like a nail, so taxpayers unleash the APA to attack IRS action regardless of how far-fetched the attack is.

In Computer Sciences, I introduce the Court’s holdings from the opening relevant headnotes that, while not technically part of the opinion, for present purposes fairly summarize the opinion (after each holding, I provide brief comment for context):

Tax Court Holds that Partners Unwilling to Settle on Terms Offered Partners Willing to Settle TEFRA Litigation Cannot Intervene if Untimely and No Acceptable Reason for Untimely Intervention (9/19/25)

In Blomquist Holdings, LLC v. Commissioner, 165 T.C. 72 (9/17/25), TC here, GS here, and TN here, the Tax Matters Partner and some (but not all) wished to participate in one of the IRS settlement initiatives for docketed syndication easement (“SCE”) cases. The particular settlement initiative required all LLC partners to agree to the settlement, meaning that the IRS could assess the settlement tax, penalty, and resulting interest consequences without much further ado. (LLC owners are not technically partners but a treated as partners for most substantive tax purposes and under the TEFRA audit procedures.) For those who are not familiar with the IRS settlement initiatives for SCE cases, an excellent introduction may be found at Hale E. Sheppard, Settling Syndicated Conservation Easement Cases With the IRS, 186 Tax Notes Federal 851 (2/3/26), here. Mr. Sheppard is an excellent tax litigator and is counsel in a number of the SCE cases in the Tax Court, but was not counsel in Blomquist (where the indicated counsel for the petitioner are from the international firm Dentons, here, which has a substantial US presence; those counsel are identified in the Blomquist opinion and may be further identified by searching on the Dentons’ site here).

This opinion in Blomquist rejects an attempt by some but not all partners to avoid the settlement agreement under the procedures in the statute and Tax Court rules for them to do so. In most litigation contexts, this attempt is called a motion to intervene, but the statute and Tax Court rules deal with the partnership version for an unwilling partner specifically. (I use the term unwilling partners; the opinions in the cases use other terms such as nonparticipating partners; the statutory provision is § 6226(c)(2); the Tax Court Rule is 248(b)(4).) The Tax Court (Judge Paris) does an excellent job of going through the rules to show why a timely request to participate in the proceedings is generally required and a late request will be permitted only in circumstances where the tardy request is justifiable. Blomquist holds that the partners trying to avoid the settlement (the unwilling partners) had not shown that the late request was justifiable. (Note that the Blomquist litigation (but not the T.C. opinion) is discussed in Hale Sheppard’s article linked above at pp. 855-856 and p. 857).

Based on Blomquist and other SCE cases where, post-Blomquist, Orders have been entered, I infer the following:

1. Based on recent litigated outcomes, the settlement offer is very good. Which is, of course, why the partners willing to accept the offer appear to have made a good decision, far better than they can hope to achieve in full trial of the matter (which would also require further wasted litigation costs and wasted time from the participants (even with the private attorneys being more than happy to waste time at their exorbitant billing rates), including judges, staff and witnesses). That, however, is just my inference from the cases I have read. In any event, it is clear that there were partners wanting to settle who were motivated, I infer, by the tax outcome (tax and penalties, with interest consequences as well) which is far better than had they litigated.

Loper Bright’s Motivated Mistreatment of Statutory Ambiguity and Best Interpretations (8/28/25)

On August 26, 2025, I gave a talk to a Houston tax group, the Wednesday Tax Forum. The paper I circulated was a high-level summary of a longer article that I have submitted for publication in the ABA Tax Lawyer in Spring 2024; the submitted article addresses the tax implications of Loper Bright Enterprises v. Raimondo, 603 U.S. 369, 377-378 (2024), see Preliminary Print here. I link that summary here so that readers may download if they wish. Note that the linked summary is redlined to show changes that I made shortly after giving the talk. I will not attempt to further summarize the arguments.

I address in this blog entry the overarching claim that I make. The domain of Chevron was a state of ambiguity where the court was not able to determine whether the agency interpretation or an opposing interpretation was the best interpretation. I call that state interpretive equipoise to relate it to the more familiar concept of factual equipoise where a factfinder is unable to determine whether a critical fact exists or not. In a state of factual equipoise, the factfinder resolves the issue by holding against the party bearing the burden of persuasion on that fact. In a state of interpretive equipoise, the court cannot find that either the agency interpretation or the opposing interpretation is the best interpretation. Chevron resolved the case in that state of interpretive equipoise, effectively placing on the opponent of the agency interpretation a burden to persuade the court that its opposing interpretation was “best.”

Why did Chevron tilt in favor of the agency interpretation in a state of interpretive equipoise? First consider the alternatives. Would it be acceptable for courts to decide in equipoise by flipping a coin, consulting a ouija board or soothsayer, or some other unprincipled way of resolving the ambiguity? Of course, that would not be acceptable. Still, courts must resolve interpretive issues in equipoise in some way. Chevron offered that way. I will address below why that is a principled resolution based on the APA, but I ask first what Loper Bright offered in lieu of Chevron to resolve cases of interpretive equipoise?

Loper Bright offers nothing for interpretive equipoise other than the ill-considered notion that courts can always interpret out all ambiguity to derive the single best interpretation. That would be nice if it made logical sense or experiential sense. Courts have the same interpretive skills after Loper Bright that they had under Chevron where they were admonished by Chevron’s famous footnote 9 to use those skills to avoid ambiguity where possible. Nevertheless, in some cases, ambiguity remained. I submit that cases of ambiguity—interpretive equipoise—will remain under Loper Bright. Loper Bright offers no guidance on what a court does where, using its best interpretive skills in de novo review, ambiguity exists.

Traditional Skidmore will not solve the problem of interpretive equipoise. Traditional Skidmore simply requires courts to respect agency interpretations in determining the best interpretations. The phenomenon I address here is where, after using all of those tools of interpretation (including Skidmore), the court cannot determine, as between the agency interpretation and the opposing interpretation, which is the best interpretation. Both interpretations must be in play—that is reasonable within the scope of the statutory ambiguity—but neither is the best interpretation. In that state of play, Loper Bright offers no way to resolve the case.

Of course, I say traditional Skidmore. Skidmore has traditionally been called Skidmore deference even though it was not deference but simply a consideration in reaching the best interpretation. See Really, Skidmore "Deference?" (Federal Tax Procedure Blog 5/31/20; 2/14/21), here. It is possible that, post-Loper Bright, courts may reimagine Skidmore to fill some of the conceptual space on the spectrum between respect and deference, sort of more than respect but less than deference, if that is a possible thing, say deference “light.” I can’t offer anything meaningful on that possibility.

Loper Bright’s Effects on the § 6751(b) Regulations (Herein Difference Between Regulations and Interpretations) (8/7/25)

I am today considering the wonders and discontinuities of Loper Bright Ent. v. Raimondo, 603 U.S. 369 (2024)(“Loper Bright”). I do this in the context of updating my Federal Tax Procedure Book editions. For this blog, I zero in on one facet related to Loper Bright’s perceived command that courts apply de novo the best statutory interpretation (whether or not it is the agency interpretation). The general rule is that judicial interpretations apply retroactively to the effective date of the statute. Harper v. Va. Dep't of Taxation, 509 U.S. 86 (1993). 

The context is the § 6751(b) regulations. 26 C.F.R. § 301.6751(b)-1, with an effective date of December 23, 2024. Those regulations were promulgated to resolve the inconsistent interpretations of § 6751(b) as courts flailed around, often inconsistently, to apply the textually nonsensical statute. Loper Bright denied Chevron deference from the fiction of statutory ambiguity, but said nothing about a statute that is ambiguous and textually nonsense. That requires that either (i) § 6751(b)  is facially invalid with no application or (ii) susceptible to interpretation which will require that lines be drawn similar to the way a line was drawn in United States v. Correll, 389 U.S. 299 (1967) (adopting the agency sleep and rest interpretive line for the statutory “away from home” requirement). In other words, a best interpretation could not be made until some authority draws the line.

At least in theory, in order to pass Loper Bright muster, the § 6751(b) interpretive regulations must state the best interpretation. For purposes of this discussion, I distinguish between the interpretation and the regulation which adopts the interpretation. The best interpretation should apply from the effective date of the statute. That means, for example, that the § 7805(b) limitations on retroactive effective dates for interpretive regulations may still apply to the regulation but are meaningless if the regulations state the best interpretation.

This phenomenon was always true but perhaps was not true for agency interpretations of ambiguous text that had no best interpretation from the effective date of the statute, but with a best interpretation discernible only by some action, such as a regulation interpretation, that permitted a best interpretation to be applied. E.g., United States v. Correll, 389 U.S. 299 (1967) (once the line drawing was approved in Correll, it applied to all pending and future cases).

Thus, the conundrum of effective dates for the § 6751(b) regulations is presented. If the interpretations in the § 6751(b) regulations are best interpretations, they apply from the effective date of the statute and should apply to pending Tax Court cases for periods prior to the regulations’ effective date of December 2024. If that is right, should not the courts in pending cases for periods prior to the December 2024 effective date be considering whether the regulations interpretation (not the regulation) applies. If the § 6751(b)  regulations are best interpretations for validity, why should courts for those pre-effective date periods not apply the best interpretations. In other words, why are Tax Court judges applying the mish-mash of interpretations preceding the effective date of the § 6751(b) regulations without considering the § 6751(b) interpretations? See e.g., Hancock County Land Acquisitions LLC v. Commissioner, T.C. Memo. 2025-50.

Prominent Senate Finance Committee Members Offer Discussion Draft of Bill to Fix Certain IRS Procedure and Administration Issues (2/2/25)

Note to Readers: This blog entry was posted yesterday to a page rather than a blog page. I have moved it to the blog page. I will leave the page error up with a link to this blog entry. Please comment on this blog page.

Senators Crapo (R) and Wyden (D), prominent Senate Finance Committee members, have proposed a discussion draft, here, of a proposed bill making what Senator Wyden says would be “common-sense fixes to Internal Revenue Service (IRS) procedure and administration.” The proposed bill is nonpartisan. Many of the proposals address issues presented in cases that I have blogged about on the Federal Tax Procedure Blog. Senators Crapo and Wyden’s section-by-section explanation of the proposal is here. The announcement of this initiative, here, seeks comments by March 31, 2025; comments may be sent to discussiondraft@finance.senate.gov.

I have reviewed the section-by-section explanation and parts of the draft bill. For what it is worth, I applaud the proposal. It indeed does provide “common-sense” fixes to problems that have unnecessarily vexed tax procedure. It does not fix all problems, but it fixes a fair number of them. Nor does it fix issues the way I or other practitioners or interested parties would have fixed them, but the fixes are pretty good. With appropriate comments, perhaps other problems could be fixed, and of course the proposals may be fine-tuned and improved.

I link here to the Table of Contents for the proposed bill which I encourage readers to review.

JAT Comments:

My comments are necessarily selective for proposals that particularly interest me (based on my blogging). I encourage readers to read the entire bill and/or the section-by-section explanation.

1. Fixing the supervisor written approval timing requirement in § 6751(b). Sec. 113. Modification of procedural requirements for penalties and disallowance periods.

As I have noted before, current § 6751(b) is poorly drafted. See e.g., Eleventh Circuit Makes Clarity from Confusion as to the Written Supervisor Approval in § 6751(b) (Federal Tax Procedure Blog 9/20/22), here. Poor draftsmanship is not surprising given its genesis in the IRS Restructuring and Reform Act of 1998. See Federal Tax Procedure (2024 Practitioner Ed.) pp. 345 and (2024 Student Ed.) 22. I have posted 26 blog entries, here, on the Federal Tax Procedure Blog discussing § 6751(b). The poor draftsmanship has given hope to those who have abused the tax system that they can avoid penalties for playing the audit lottery for a real or perceived IRS footfault in the assertion of penalties. This hope has played itself out in, for example, syndicated conservation easement cases as recently as January 30 in Park Lake II v. Commissioner, T.C. Memo. 2025-11, GS here (finding no footfault, so that the case can proceed on the merits which may be not much but will chew up a lot of IRS, taxpayer, and Court time and resources).

The solution in the proposed bill is to amend § 6751(b) to require that the supervisor approval must occur before the initial determination of the penalty (much like the current law) but defines initial determination by adding at the end of § 6751(b):

The Treasury Green Book Proposals for Tax Legislation on Procedure (including the NTA Blog Regarding the § 6751 Proposal) (5/7/24)

The National Taxpayer Advocate, currently Erin M. Collins, offers a blog that often contains information useful for tax procedure enthusiasts. The recent blogs are here. The most recent is Treasury FY 2025 Green Book Proposes to Essentially Eliminate Written Supervisory Approval for Penalties (NTA Blog 5/2/24), here.
 
The NTA laments that Treasury wishes to do away with § 6751(b)’s written supervisory approval requirement.  Section 6751(b) is a poorly drafted statute causing considerable confusion and requiring considerable administrative and judicial resources. From my perspective, the commotion around § 6751(b) has served little purpose other than rewarding tax abusers by avoiding penalties because of an IRS procedural foot-fault that really did not affect those taxpayers negatively. Nevertheless, being the NTA, the NTA must advocate for the taxpayers and finds some value in the written supervisor approval requirement. For Treasury’s view on the subject, readers might want to read the section of the Green Book General Explanations starting on p. 175, here.
 
The Green Book catalogs Treasury’s proposals to Congress for changes in statutory law. The Treasury General Explanations of the Green Book are here. The Table of Contents for the General Explanations is here. The General Explanations make the proposals in a format discussing present law, reason for change, and the proposals for change.

I thought I would mention without detail some of the other Green Book proposals that might be of interest to tax procedure enthusiasts. These proposals are under headings titled Improve Tax Administration and Improve Tax Compliance (see Table of Contents pp. iii & iv which provide links for the items in the Table of Contents). All of the proposals are important, but the ones I thought worth mentioning are:
 
1. The modification of § 6751(b)’s written supervisor approval requirement discussed above, starting at p. 175 here. (JAT Note: One matter perhaps relevant here is that Treasury has Proposed Regulations that attempt to make some sense and order from the 6751(b)’s written supervisor approval requirement. See Musings on Proposed § 6751(b) Regulations and the Potential Demise of Chevron Deference (Federal Tax Procedure Blog 1/8/24; 1/15/24), here.)
 
2. Revision of § 6103 to clarify that Tax Return Information Disclosed on the Public Record in Judicial Proceedings or in Publicly Filed Notice of Federal Tax Lien Is Not Tax Return Information Prohibited From Disclosure (General Explanations starting at p. 187, here.)
 
3. Allow Admission in Innocent Spouse Cases of Relevant Evidence at Trial (Rather than Limited to Administrative Record) (General Explanations starting at p. 190, here.)

D.C. Circuit Affirms Tax Court's Holdings on Written Supervisor Approval, Qualified Amended Return, and Statute of Limitations on UBS JDS (4/25/24)

In Lamprecht v. Commissioner, ___ F.4th ___ (D.C. Cir. 4/23/24), D.C. Cir. here and GS here, the Court affirmed the Tax Court in Lamprecht v. Commissioner, T.C. Memo. 2022-91, here. See Tax Court Sustains Accuracy-Related Penalty for Offshore Accounts, Rejecting Taxpayer's QAR, Statute of Limitations, and § 6751(b) Arguments (Federal Tax Procedure Blog 9/1/22), here. In so doing, the Court (Judge Walker) steps through the arguments and the resolution in a crisp straightforward opinion.

The background discussed in the opinion is that the IRS issued a John Doe Summons to UBS in 2008 (which essentially set off the IRS and DOJ foreign account initiative). UBS did not immediately reply with full and complete response. As a result, the civil statute of limitations for persons within the scope of the summons (U.S. person account holders) was suspended and did not pick up until the summons was resolved. Suspension of Statute of Limitations From the UBS John Doe Summons (Federal Tax Crimes Blog 1/26/14), here.

The opinion holds in the Court’s outline format:

I. The IRS Complied with 26 U.S.C. § 6751(b)(1)

A. It Doesn’t Matter When (or Whether) a Supervised
Tax Examiner Signs the Approval Required by
§ 6751(b)(1)’

B. The IRS May Use a Form 5345-D to Comply with
§ 6751(b)(1)

C. The Tax Court’s Refusal to Exclude the Forms 5345-D
from Evidence Was Not an Abuse of Discretion

II. The Lamprechts’ Corrected Returns Did Not Protect
Them from Penalties [QAR Issue]

A. The [UBS] Summons Was Legal

B. The Summons Relates to a Benefit Claimed on the
Lamprechts’ Original Tax Returns

III. The Penalty Assessments Were Not Too Late

A. The [UBS] Summons Was Not Resolved in August 2009

B. The [UBS] Summons Was Legal (Again)

 JAT Notes:

Tax Court Judge Lauber Denies Petitioner Motion for Summary Judgment Rejecting Fraud Penalties in Allegedly Abusive SCE Case; Some Background (4/14/24)

In North Donald LA Property LLC et al. v. Commissioner (Order T.C. Dkt. 24703-21 #140 4/10/24), TA here and TC Dkt here*, a syndicated conservation easement (“SCE”) case, the Court (Judge Lauber) denied the petitioner’s motion for partial summary judgment. 

* This is an order and not an opinion of the Court. Hence there is no direct access to the Court’s order. Access through the Court (as opposed to a third party provider) is by using the Court website to access the docket entries for Case # 24703-21 and going to the particular docket entry (in this case entry 140 dated 4/10/24). Here there is a third party provider, Tax Analysts on its public site sponsored by Deloitte. I take this opportunity to state my appreciation to Tax Analysts and Deloitte for providing this service.

Judge Lauber opens (slip op. 1):

On February 16, 2024, petitioner filed a Motion for Partial Summary Judgment seeking a ruling that the civil fraud penalty, as a matter of law, does not apply because respondent has not alleged facts showing that NDLA “intended to evade taxes known to be owing by conduct intended to conceal, mislead, or otherwise prevent the collection of taxes.” Memorandum in Support of Motion for Partial Summary Judgment at 7 (quoting Parks v. Commissioner, 94 T.C. 654, 661 (1990)). In essence, petitioner contends that respondent cannot carry his burden of proving fraud by clear and convincing evidence because NDLA disclosed on its tax return the facts relating to the conservation easement transaction. Finding that there exist genuine disputes of material fact regarding the possible application of the fraud penalty, we will deny the Motion.

Judge Lauber starts the discussion of the facts as follows:

Sixty West, LLC (Sixty West), was a promoter of syndicated conservation easement transactions.n3 In March 2016 Reserve at Welsh, LLC (Welsh), an entity controlled by Sixty West, purchased 3,324 acres of land in Jefferson Davis Parish, Louisiana (Parent Tract). Sixty West allegedly purchased the Parent Tract for use in multiple syndicated transactions that would generate large charitable contribution tax deductions for investors. The total purchase price for the Parent Tract was $9,888,008, or $2,975 per acre.
   n3 “Promoter” is a loaded term in the syndicated conservation easement space because of the penalty imposed on “promoters” by section 6700(a). In this Order we use the term “promoter” in its ordinary sense, making no determination as to whether Sixty West was a “promoter” within the meaning of section 6700(a), a question that is not before us.

Judge Lauber’s recitation of the rest of the relevant facts then follows a recognizable pattern for those who have watched abusive SCE cases. Setting aside technical foot-faults, the core common pattern is the substantial overvaluations of the donated easements. Based upon the appraisal  of a frequent appraiser in abusive SCE cases (Claud Clark III), NDLA claimed a donation of $115,391,000 for a portion of the property originally purchased. (Order slip op. 2.) That contribution claim was based upon a “’before value’ of the property of $116,303,000, or $471,4561 per acre. Subtracting from the sum an “after value” of $912,000, Mr. Clark asserted that the easement was worth $115,391,000.’” (Slip op. 2-8.)

Timely disclosure Forms were filed as follows (Slip op. 30):

Litigation is About Persuasion Which Requires Credibility (4/12/24; 4/23/24)

I write on the tax saga of Burt Kroner. The underlying saga goes back many years and has played out in three tax cases.

• Kroner v. Commissioner (Kroner I), T.C. Memo.  2020-73, here, sustaining the substantial penalty but denying the substantial penalty because of failure to obtain written supervisor approval required by § 6751(b)(1).
• Kroner v. Commissioner (Kroner II), 48 F.4th 1272 (11th Cir. 2022), here, reversing Kroner I on the § 6751(b) penalty issue (the Tax Court’s sustaining of the deficiency was not appealed); I previously wrote on Kroner II. Eleventh Circuit Makes Clarity from Confusion as to the Written Supervisor Approval in § 6751(b) (Federal Tax Procedure Blog 9/20/22), here. 
• Kroner v. Commissioner (Kroner III), T.C. Memo. 2024-41, TA here and GS here, applying the penalty on the merits on remand and rejecting Kroner’s reasonable cause defense. 

The holding in these cases that will likely be cited most in the future is the holding in Kroner II regarding the proper timing of the written supervisor approval requirement as courts further calibrate precisely what the requirement is (perhaps based in part on the Treasury proposed regulations when finalized).

I write today on the merits of the tax deficiency which the recitation of facts in the recent opinion in Kroner III suggested I should take a further look.

The deficiency issue was whether a series of transfers into Kroner’s accounts were gifts from a business associate (also an alleged friend), a David Haring, or taxable income. Kroner claimed the transfers were gifts which IRC § 102 excludes from taxable income; the IRS claimed that they were not gifts (or at least that Kroner had not shown on audit or at trial that they were gifts). The concept is that the Code taxes all income (generally all accretions to wealth presently subject to a realization requirement) unless the income is excluded by some Code section, in this case § 102. The taxpayer bears the burden of persuading the trier of fact that the transfers were gifts.

As an aside, the gift v. income issue can arise in many settings. See e.g., my trial and appellate war stories in Justice Thomas and Tax -- The Plot Sickens (Federal Tax Procedure Blog 10/29/23; 10/31/23), here.

Judge Marvel explains the Code’s gift meaning (Kroner I, slip op. 8):

Discussion with Reporter about Possible Demise of Deference, Now Often Called Chevron Deference (3/28/24)

Yesterday, I spoke with a reporter about the effect of reversal or elimination of Chevron deference would have on tax administration. As readers of this blog will know, that issue is now before the Supreme Court in two cases. Loper Bright Enterprises v. Raimondo (SEC) (Sup. Ct. Dkt. 22-451, here.; and Relentless, Inc. v. Department of Commerce (Sup. Ct. Dkt 22-1219, here). 

I thought some readers might like to engage with some of the points of the discussion. I will bullet point the key points starting with some predicate points to set up the issue of the effect of reversal or elimination of Chevron deference.

• The key predicate step is to define deference. Deference is a court applying an agency interpretation that the court does not believe is the best interpretation of the ambiguous statutory text. Based on my anecdotal research in significant datasets of courts of appeals opinions noising about Chevron, courts often are not concluding that there is a better nonagency interpretation. Best interpretations of otherwise ambiguous statutory text easily pass Chevron’s test that the interpretations be reasonable.
• I say that this is a predicate step, but it points to the final conclusion. If the Supreme Court says that deference is eliminated, that will only affect those cases where the court affirmatively determines that a nonagency interpretation is the best interpretation. Not affected are those cases where the court determines that, within the range of reasonable interpretations of the ambiguous statutory text, the agency interpretation is best reasonable interpretation or the court is in equipoise as to the best reasonable interpretation (unable to determine that any interpretation is best and agency interpretation is as good as nonagency interpretation).
• I did not discuss with the reporter how often a court might be in equipoise as to the best interpretation; some like the late Justice Scalia claimed that he was rarely if ever in equipoise in statutory interpretation; for present, I assume that legal realists know or intuit that a state of equipoise in statutory interpretation is at least a possibility.
• Chevron did not create deference. Deference existed long before Chevron, in Supreme Court cases describing deference as we now describe Chevron deference—(i) ambiguous statutory text; and (ii) reasonable agency interpretation within the scope of the ambiguity. See John A. Townsend, The Tax Contribution to Deference and APA § 706 (December 14, 2023 SSRN 4665227), here (showing these articulated features particularly in tax cases before the APA).
• Reversal or elimination of Chevron deference will affect only interpretations in Treasury regulations (both final and temporary) because (i) Treasury (IRS) and DOJ Tax do not claim Chevron deference (or any other deference) and (ii) courts do not “defer” to interpretations in IRS subregulatory guidance (Revenue Rulings, etc.). In this regard, Skidmore respect is often mislabeled as deference but is not deference. See Really, Skidmore "Deference?" (Federal Tax Procedure Blog 5/31/20; 2/14/21), here.
• If I am right in my conclusion based on anecdotal research and my intuition that courts now do not commonly really defer to agency interpretation (see definition above), then I suspect that eliminating deference (whether called Chevron or not) will not affect many outcomes, certainly not as many as the commotion about Chevron would suggest.
• Eliminating Chevron deference will exponentially increase tax litigation. It has been observed that the mix of administrative law and tax administration is like a lawyer with a hammer who imagines that there are a lot of nails out there that he or she can profitably hammer through litigation at high billing rates. See Bryan Camp, The APA Is Not A Hammer (Procedurally Taxing Blog 6/24/22), here (“Kristin Hickman loves the APA. To channel Jed Rakoff, it’s her Stradivarius, her Colt 45, her Louisville Slugger, her Cuisinart, and her True Love. It’s her Hammer, her righteous Mjölnir. And when you have a hammer, everything looks like a nail. Including ALL Treasury regulations.).
• The question that should be asked is whether the burst of litigation attacking IRS interpretations in regulations will (or should) affect many final outcomes. I think not. But lawyers with this anti-Chevron hammer will certainly try and in the process charge their high fees. The IRS will underwrite those attempts by giving the taxpayers deductions for the high fees they pay their lawyers to go on what is often a quixotic adventure. (Part of the cost-benefit analysis for taxpayers is how many dollars are involved and the benefits of delay (including the audit lobby and the time benefit/cost of delay).)
• I pointed particularly to the commotion about the written supervisor approval requirement in § 6751(b) involving intersection of a poorly written statute (drafted in a highly partisan atmosphere surrounding RRA ’98 apparently without much thought about how it would actually work) and courts trying to make sense from nonsense. Sooner or later (much, much later), the courts will reach some consensus as to the various ambiguous (or nonsensical) terms in the statute or, more likely, either the courts will honor the IRS’s interpretations in final regulations (now in proposed form) or the Supreme Court will have to come in more than once to clean up the mess. See Musings on Proposed § 6751(b) Regulations and the Potential Demise of Chevron Deference (Federal Tax Procedure Blog 1/8/24; 1/15/24), here.
• Section 6751(b) is just one instance where deferring to agency regulations will avoid a lot of unnecessary commotion. Another instance I like to use (although not mentioned to the reporter) are interpretations such as those “deferred to” in United States v. Correll, 389 U.S. 299 (1967) where the agency interpreted the statute’s “away from home” requirement to include sleep or rest, hardly compelled by the statutory text but reasonable for administering the tax system. What happens to the thousands, if not millions, of interpretations buried in Treasury regulations that may now seem to be in play to those with a high-priced hammer?
• Finally, I vented to the reporter my concern that deference is just a battle in the larger war to discredit what is perceived (or claimed for political purposes) to be an evil administrative state. That is a political issue that plays out in many contexts; deference is just one context where politics is disguised with legal and even constitutional overtones (lipstick on the pig). My point is that given the community we have in the United States and where we want to be in the world, a robust administrative state is required. That means that we should honor those who work in that administrative state (military, IRS agents, etc.) and strive to make them better rather promoting a narrative that administrative agencies are enemies, a narrative that can seep through our fabric, even for such things as Chevron deference. 

Added 3/30/24 @ 2:30 pm:

Oral Argument in Corner Post on Whether Procedural Challenges to Regulations Are Subject to § 2401(a)’s Six-Year Statute of Limitations (2/21/24; 4/6/24)

I previously included in another blog an introduction to Corner Post v. Board of Governors of the Federal Reserve System (Sup. Ct. Case No. 22-1008), here, See Update on Supreme Court Deference Case (with Speculation) and New Supreme Court case on General 6-year Statute for Challenging Regulations Interpretations (Without Speculation) (Federal Tax Procedure Blog 10/1/23), here. The question presented in Corner Post is addressed to § 2401(a)’s general fallback statute of limitations of six years :

Does a plaintiffs APA claim "first accrue[]" under 28 U.S.C. §2401(a) when an agency issues a rule-regardless of whether that rule injures the plaintiff on that date (as the Eighth Circuit and five other circuits have held)-or when the rule first causes a plaintiff to "suffer[] legal wrong" or be "adversely affected or aggrieved" (as the Sixth Circuit has held)? 

The Solicitor General (“SG”) worded the question presented slightly differently (appellate fans will understand the subtle difference):

Whether the court of appeals correctly held that petitioner’s freestanding challenge to a rule adopted by the Board of Governors of the Federal Reserve System in 2011 was untimely under the six-year statute of limitations in 28 U.S.C. 2401(a) because petitioner had brought that challenge more than six years after the rule was adopted.

I noted that the resolution of Corner Post could affect many cases, including tax cases. E.g., Hewitt v. Commissioner, 21 F.4th 1336 (11th Cir. 2021), GS here (where the Court invalidated an interpretive tax regulation promulgated in the 1980s for procedural irregularity (failing to consider and respond to meaningful comments during the notice and comment process).

Oral argument in Corner Post was held Tuesday, February 20, 2024. See the transcript here and the recording here. I won’t cover oral argument except as it might affect an issue I have discussed before—the difference between arbitrary and capricious procedural review and interpretation review through Chevron deference. The context for the following excerpts is whether procedural challenges (such as failure to consider and respond to comments in the notice and comment process) are subject to § 2401(a)’s six-year statute of limitations. Other nonprocedural challenges, referred to as substantive but, I think, meaning interpretive challenges of whether the regulation properly interprets the statute may be made on an as-applied basis during enforcement many years after the regulation was promulgated. [Added 4/6/24 1pm - see * at end of this blog entry] I quote the entire portions of the transcript (Tr. 33-24; & 73-74; note that Mr. Weir is counsel for Corner Post. and Mr. Snyder is Assistant Solicitor General, counsel for the Government):

Experts in Technical Area (FDA) Caution Supreme Court About Problems in Overruling Chevron Deference (1/12/24)

I recently wrote a blog on the bad effects of eliminating Chevron deference in a specific context—the § 6751(b) regulations bringing clarity to the legal mess created by the courts. Musings on Proposed § 6751(b) Regulations and the Potential Demise of Chevron Deference (Federal Tax Procedure Blog 1/8/24; 1/15/24), here. A team of multi-disciplinary authors has published a similar blog relating to the Federal Drug Administration (“FDA”). Nikhil Chaudhry, Reshma Ramachandran, & Joseph Ross, Overruling Chevron and FDA Decision-Making (Yale J. on Reg.: Notice & Comment 2/9/24), here. The authors credentials are:

Nikhil Chaudhry is a Postgraduate Associate at the Yale Collaboration for Regulatory Rigor, Integrity, and Transparency. Dr. Reshma Ramachandran is an Assistant Professor of Medicine at the Yale School of Medicine and Co-Director of the Yale Collaboration for Regulatory Rigor, Integrity, and Transparency. Dr. Joseph Ross is a Professor of Medicine at the Yale School of Medicine, Professor of Public Health at the Yale School of Public Health, and Co-Director of the Yale Collaboration for Regulatory Rigor, Integrity, and Transparency.

The authors make essentially the same point I made—abandoning Chevron in technical areas, like tax and the FDA, so that judges rather than experts make key interpretations will (quoting the Conclusion):

Overruling Chevron would drastically increase uncertainty and make public health agencies like the FDA less predictable and less effective. There is a high likelihood that decades of precedent would be undone by individual challenges to regulatory decisions, leading to great disorder—for Congress, for the agency, and for physicians and patients across the United States. The highest court should at the very least create a carve out for deference to scientific agencies, although it’s unclear how this would be operationalized. Regardless of how this court decides, with an array of complex public health and medical decisions arising in the 21st century, we need an effective government and more regulatory oversight, not less.

Among these authors’ arguments is the following:

Key Points in Oral Arguments on 1/17/24 in the Supreme Court Cases Considering the Future of Deference (1/18/24)

I have now had the time to read the transcripts of oral arguments in the cases challenging Chevron deference:

• Loper Bright Enterprises v. Raimondo (SEC) (Sup. Ct. Dkt. 22-451, here.) (“Loper Bright”), transcript here,
• Relentless, Inc. v. Department of Commerce (Sup. Ct. Dkt 22-1219, here ) (Relentlesss transcript here),

Relentless was argued before Loper Bright. I infer that was because Justice Jackson recused herself in Loper Bright.

I will discuss what I think are the key points of the oral arguments. There is a lot more in the transcripts, including both somewhat important points and some nit-picky points. I will consider later posting the transcripts with pdf highlights with discussion behind the highlights as comments for readers to review if they wish.

With apologies for readers that may not have some introduction into the jargon of administrative law, I will often just use that jargon without further citation. For example. I refer to (i) Chevron deference which refers to the deference approved in the case of that name and (ii) Brand X which is the deference approved in a Supreme Court opinion with that name. I do not give the cites for these common administrative law shorthand before having any understanding of the issues involved.

In my discussion, I do not attempt to predict whether the Court will pronounce the demise of deference (whether with the Chevron label or not) or the constriction of Chevron deference, or whatever. I note, that  the three Trump appointees (Justices Gorsuch, Kavanaugh, and Barrett) almost certainly will vote for the demise or substantial restriction of deference (at least in its traditional formulation), because of their prior anti-Chevron musings and that anti-Chevron was a litmus test for their respective appointments as Justices.  See Jeremy W. Peters, Trump’s New Judicial Litmus Test: ‘Shrinking the Administrative State’ (NYT 3/26/18) (noting administrative state angst with anti-Chevron as a litmus test for Trump’s judicial, particularly Supreme Court Justice, nominees). And, Justices Thomas and Alito have expressed disdain for Chevron. Justices Kagan, Sotomayor, and Jackson seem pro-Chevron, although they might agree to some constriction (such as doubling down on Chevron Footnote 9). I think Chief Justice Roberts can go either way, but being an institutionalist may be inclined to lean toward stare decisis without terminating (but with constricting) Chevron in futuro.

What Are the Perceived Evils in Chevron? (Herein of The Deference Concept)

NTA 2023 Annual Report and 2024 Purple Book (1/15/24)

The National Taxpayer Advocate has issued her 2023 annual report (here allowing download of the Full Report, the Executive Summary, and the NTA Purple Book Compilation of Legislative Recommendations, and Research Reports). The Full Report and its components have much that tax procedure enthusiasts will want to consider. I bullet point here some of the items that caught my eye on a quick overview. I may come back with more detail later.

• MOST LITIGATED ISSUES – NATIONAL TAXPAYER ADVOCATE RECOMMENDATIONS TO MITIGATE DISPUTE, pp. 169-171, beginning here.
• The 2024 Purple Book: Compilation of Legislative Recommendations, here.

Some of these are repeats of carryover issues from earlier years. For example, her recommendations on § 6751(b), which I discuss in Musings on Proposed § 6751(b) Regulations and the Potential Demise of Chevron Deference (Federal Tax Procedure Blog 1/8/24; 1/15/24), here.

My only comments are:

Musings on Proposed § 6751(b) Regulations and the Potential Demise of Chevron Deference (1/8/24; 1/15/24)

Section 6751(b)(1) provides:

(1) In general

No penalty under this title shall be assessed unless the initial determination of such assessment is personally approved (in writing) by the immediate supervisor of the individual making such determination or such higher level official as the Secretary may designate.

Penalties cannot be assessed unless they have written supervisor approval by some magical moment; stated otherwise, an assessment or a step predicate to assessment of penalties without prior written approval is invalid. The only magical moment in the statute is the “initial determination of the assessment.” That statutory language on its face is nonsense because there is no “initial determination of the assessment,” at least other than the assessment itself. The courts have made hash of the language of the statute, which, through its fuzziness coupled with a snippet in the legislative history, lends itself to fuzzy thinking about the tax system we have and to disparate outcomes. In short, the interpretation and application of § 6751(b) is a mess. 

I  discuss the mess in my Federal Tax Procedure (current 2023.2 Practitioner Edition SSRN here) at pp. 385-393. Because of the mess, which has been brewing for several years, I have noted in recent versions of my Federal Tax Procedure Practitioner Edition (e.g., 2023.2 Edition p. 387 n. 1645):

    n1645 This appears to me to be a classic case where a well-considered statutory amendment or, failing that, comprehensive interpretive regulations could clean up the mess. The courts have already found the statute ambiguous, the condition required for “reasonable” interpretive regulations. Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). By adopting well-considered interpretive regulations, the IRS could essentially moot out the plethora of prior and future court machinations to deal with the problem. See National Cable & Telecommunications Assn. v. Brand X Internet Services, 545 U.S. 967, 981 (2005) (permitting the agency to adopt interpretive regulations contrary to prior judicial interpretations so long as the prior judicial interpretations are not compelled by the text of the statute, which would not be true here because the statute is ambiguous). I don’t think reversal of the court interpretations of § 6751(b) would be foreclosed under Brand X by prior judicial precedent that foreclose the agency new interpretation as occurred in United States v. Home Concrete & Supply, LLC, 566 U.S. 478 (2012). An interpretive regulation, with notice and comment, by Treasury, the expert on IRS processes and the big picture, would likely produce a more holistic set of interpretations than courts can do anecdotally as unique cases arise. The problem with the regulations approach is that final regulations could take a very long time, perhaps a couple of years. But since the regulations would be interpretive, Treasury could adopt a Temporary Regulation and, provided that the final Regulation is adopted within three years, the Temporary Regulation could be effective immediately (§ 7805(e)) and the final Regulation could be effective from the date of the Temporary Regulation (§ 7805(b)). And, perhaps even, the Temporary and Final Regulations might be persuasive authority under Skidmore v. Swift & Co., 323 U.S. 134 (1944) for application retroactively to the date of the statute for any case still in pipeline or getting there involving conduct prior to the effective date of the Temporary Regulation. Such retroactive application beyond the limits imposed by § 7805 is a long subject, I think that the interpretation might apply retroactively with the only limit being that the  interpretation be within the scope of § 6751(b)’s ambiguity from the enactment of the statute.

Separately, the Taxpayer Advocate proposed a legislative solution. See Legislative Recommendations 32 and 36 in Taxpayer Advocates Legislative Recommendations for 2023 and 2022, respectively as follows: